The initial purchase price for my antivirus software was $29.99, with a requirement that I enroll in automatic renewal for after the first year. The renewal price was $109.99. Still, nothing prevented me from cancelling at the end of the first year and purchasing a new package, which I was able to easily find for $19.99. That’s what I’ve just done. It’s a maneuver Technische Universität Braunschweig researchers refer to as a “tactical termination,” defined by my cessation of the contract while intending to continue using the service, with the objective of avoiding price discrimination.
In analyzing reasons for tactical termination and ways a marketer can reduce the frequency, the researchers point to norms. Customers are more likely to stay entangled with higher renewal fees if social norms reinforce moral obligations and less likely to stay entangled if their social interchanges suggest they’d be foolish to do so. Once a consumer engages in tactical termination, the behavior becomes closer to being a norm, so they’re more likely to continue doing it. Toward reducing tactical termination, remind customers as their renewal date approaches of the special ways in which you’ve been treating them and will continue to do so. Findings from University of Arizona and Yale University indicate it also is helpful to show how the service reinforces the user’s self-identity.
Because a major motivator of tactical termination is the customer’s perception they’re not being appreciated for loyalty, offer special rewards to those who renew. Northwestern University studies indicate it’s best if you avoid stating a monetary value for this reward. That makes it less likely the consumer will compare its value to the value of the forgone price break, which allows you to keep the cost of the reward low.
Research findings from London Business School and Massachusetts Institute of Technology suggest another tactic: Tell new customers the reason they’re getting a discount is to compensate for the hassle of changing habits and integrating the service into their lives.
This has two helpful effects:
- It justifies the new user discount in a way which makes the more experienced user not begrudge the benefit given to succeeding generations of new users. This is rationalization.
- It encourages the new user to pay back the discount by changing habits and/or integrating the subscription into their lives. This is reciprocity.
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Beware Dynamic Pricing 
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